Ford Needs New Expedition, Navigator to Bolster its Bottom Line
Ford is thankful right now for three very large vehicles: the F-Series Super Duty and the new Ford Expedition and Lincoln Navigator that go on sale later this year. The company’s falloff in first-quarter earnings, reported today, underscore the fact that the profitable big SUVs can’t come fast enough.
The 2018 Expedition was unveiled in February and goes on sale in the fall. The new Navigator just made its debut in March at the New York auto show and goes on sale late this year. The Super Duty pickup that debuted last year is still ramping up and hitting its stride in the market.
Ford needs these high-profit new vehicles in its lineup as the U.S. auto industry tapers off, and because Ford has shed all its luxury marques except Lincoln which remains a small player in the luxury segment. As Daimler earnings also released today show, there is a lot of money to be made with high-end vehicles. While Ford saw its first-quarter income fall to $1.6 billion, down a whopping $800 million or a 34-percent drop, Daimler doubled its net income to $3 billion in the same period.
Earnings reports may be dry stuff, but they are telling markers when it comes to product. Sure, part of Ford’s financial results reflect higher costs for recalls, engineering, product launches, steel, and other materials. And the quarter looks bad compared with a year ago when F-150 sales were peaking and Ford recorded the best quarter in the company’s history. The F-150 is Ford’s bread and butter: a profitable high-volume vehicle in a segment that accounts for 13 percent of U.S. vehicle sales. The pickup is still a strong seller a year later with an added boost from the new F-150 Raptor that has a waiting list. The American love affair with trucks and SUVs is why North America is Ford’s profit driver. But in the first three months of the year, pretax profits only hit $2 billion, which is $1.1 billion less than a year ago.
In talking to investors, Ford CEO Mark Fields said the company will have better results in subsequent quarters, in part because customers are paying more for Ford vehicles. In the first quarter the average price customers paid for a vehicle in the U.S. was up $1,971, compared to an industry average increase of $506. It is courtesy of vehicles like the Super Duty. Demand is strong and more than half of buyers are opting for the top trim levels: Lariat, King Ranch, and Platinum. The average transaction price is up $6,100 to $56,000. The new Expedition and Navigator should also perform well and bring in top dollar.
Ford officials may rue the day they got rid of Jaguar, Land Rover, Aston Martin, and Volvo. But in these days of reasonable gasoline prices and interest rates, the company is expecting strong returns from investment in its big trucks and SUVs.
We’ll let you know, after the second-quarter earnings are released in July, if fortunes are picking up.